I would stretch the CD-RW & spend the $26 on a new DVD DL-RW.
As for your HDD's, I would recommend upgrading the 40GB drive. You can still use the 200GB as storage drive. It seems your system would be best suit with a small SSD if you can fit it into your budget. If you can't, get the WD 640GB Black. You will see an vest improvement in your system with any of these two drives.
Get a large modern HDD to use as your main drive and boot drive, I went from an old 80GB HDD that came with my desktop back in '02 to a 250GB seagate 7200.10 a few years back and the performance different was quite noticeable. Also you wont be able to carry over that many old IDE devices today so you will be forced to drop atleast 1 of each as modern boards only support 1 PATA cable so you are restricted to 2 devices, so you are going to need either SATA optical drives or a SATA HDD.